Meyer's Estate v. Commissioner of Internal Revenue

110 F.2d 367, 24 A.F.T.R. (P-H) 503, 1940 U.S. App. LEXIS 4548

• Court: Court of Appeals for the Second Circuit
• Decided: March 18, 1940
• Docket: 157
• Status: Published

Opinions

CHASE, Circuit Judge.

The deficiency which the Board of Tax Appeals redetermined and which the petitioner is seeking to have set aside was brought about by disallowing two items as deductions from the gross estate of the decedent. One was the amount of the arrears, due at his death, to a former wife under a separation agreement; and the second was the commuted value of additional payments due her under the agreement during the remainder of her life.

It is clear and undisputed that both sums were debts owing because the decedent had promised to pay and decision must turn upon whether they were claims against the estate which were contracted for an adequate and full consideration in money or money’s worth so as to fulfill the condition upon deductibility imposed by § 805 of the Revenue Act of 1932 as limited by § 804 of the same Act, 26 U.S.C.A. Int.Rev.Code, § 812(b). For present purposes the effect of the two named sections is made clear by saying that the limitation of § 804 is that “a relinquishment or promised relinquishment of dower, curtesy, or of a statutory estate created in lieu of dower or curtesy, or of other marital rights in the decedent’s property or estate, shall not be considered to .any extent a consideration ‘in money or money’s worth’ ”.

In 1922, the decedent, Arthur G. Meyer, and his then wife, Ida M. Meyer, were residents of New York. They executed a separation agreement under which he became bound to transfer certain property to her and he and his estate were bound to make future yearly payments to her during her lifetime upon stated contingencies in consideration of her release of all her dower rights and of her right to support and maintenance from him. Ida M. Meyer later obtained a divorce from the decedent which became absolute in January 1926. He later married Margaret W. Meyer, who represents his estate as executrix in these proceedings.

There is no proof that the decedent, though a man of substantial means, owned any real estate in which his wife Ida M. could have had a dower interest except two lots of comparatively little value. The petitioner offered to prove that after the divorce he acquired more real estate but that was excluded and properly so for after Ida M. ceased to be decedent’s wife the kind and amount of his property bore in no way upon what her dower or other marital rights may have been while she was married to the decedent. Van Blaricum v. Larson, 205 N.Y. 355, 98 N.E. 488, 41 L.R.A., N.S., 219, Ann.Cas.1913E, 553.

A point has been argued for the petitioner that should be considered briefly in order to put it to one side before the merits of the petition are taken up. It is that there are constitutional reasons why these statutes are invalid if they should be held to preclude the taking of the deductions claimed. Such a contention can be made only when there is a failure to distinguish between the right to measure such a transmission tax as the federal estate tax by the value of the property which death causes to be transmitted and the partial relinquishment of that right by allowing certain deductions to be made from that value before the tax is computed. It is not essential to the validity of an estate tax that all claims which may be enforced against the property should be deducted before making the calculation. Taft v. Commissioner, 304 U.S. 351, 58 S.Ct. 891, 82 L.Ed. 1393, 116 A.L.R. 346; Empire Trust Co. v. Commissioner, 4 Cir., 94 F.2d 307.

So Congress, having the power to determine whether to allow certain claims to be deducted before arriving at the base amount on which the tax is to be computed may exercise that power or not and if it does exercise it may do so with whatever uniform restrictions it cares to impose. Whether or not such deductions are allowed, no property not transmitted at death is included in the estate. Compare, Porter v. Commissioner, 2 Cir., 60 F.2d 673; Sheets v. Commissioner, 8 Cir., 95 F.2d 727. A taxpayer has no right in respect to this sort of a deduction except to be treated as others are in like situation. There is no constitutional right to be preserved when such a deduction is allowed or to be denied when it is not. All is within the discretion of Congress and the controlling factor is what the statute requires. Sec. 804 of the 1932 Act makes it abundantly clear that a relinquishment, or promised relinquishment, of dower, shall not in this connection be considered to any extent the kind of consideration necessary for a claim to make it deductible. In so far as that was the consideration the deduction was properly denied.

That part of the consideration which was the giving up by the wife of her right to support is also fairly within the phrase “other marital rights in the decedent’s property or estate” though not of the same nature as dower. Nor need it be. We are only concerned with enforcing restrictions upon deductions which Congress has declared. The right of the wife to support and maintenance from her husband is what she gave up in addition to her relin quishment of dower. Let that right be whatever it may have then been under New York law. It was whatever right to support and maintenance her marital status gave her. But for her marital status she had nothing to relinquish in that respect. In that sense it was a marital right and both the language and the spirit of § 804 includes it whether it was but a personal obligation of the husband during the marriage or in some way amplified by statute to be a charge upon his property. In any event, the petitioner has failed to show a statutory right to the deductions and so failed to show cause for reversal. White v. United States, 305 U.S. 281, 59 S.Ct. 179, 83 L.Ed. 172; New Colonial Co. v. Helvering, 292 U.S. 435, 54 S.Ct. 788, 78 L.Ed. 1348.

Affirmed.